BP shares drop, costs approach $1 billion

BP PLC's shares plunged to their lowest level in a year after the latest failure to plug the oil leak

Published June 1, 2010 1:02PM (EDT)

Shares in BP PLC plunged on Tuesday after the failure of the oil company's latest attempt to block a massive oil leak in the Gulf of Mexico.

BP stock was down 15 percent at 421 pence ($6.13) in early afternoon trade on the London Stock Exchange -- the lowest level in more than a year -- as the British company also revealed that costs for the spill have reached $990 million.

The shares have now lost more than a third of their value, wiping some 43 billion pounds off BP's value, since the explosion at the Deepwater Horizon rig six weeks ago.

"This situation has now gone far beyond concerns of BP's chief executive Tony Hayward being fired, or shareholder dividend payouts being cut -- it's got the real smell of death," said Dougie Youngson, oil analyst at Arbuthnot.

"Given the collapse in the share price and the potential for it to fall further, we expect that it could become a takeover target," particularly if its operating position in the U.S. becomes untenable," he added.

BP said the $990 million cost so far related to spill containment, relief well drilling, grants to Gulf states, claims already paid and federal costs.

The London-based company said it has received 30,000 claims and made more than 15,000 payments, totalling some $40 million. It added it was too early to quantify other costs and liabilities.

The company's attempts at a "top kill" operation, shooting mud and other debris into the leaking well, were revealed to be unsuccessful over the weekend.

Tuesday's trading session was the first response to the latest developments as the London market was closed on Monday for a public holiday.

BP is now attempting to use remote-controlled submarines to cut pipes before placing a containment cap over the leak.

The spill, which has dumped between 18 and 40 million gallons into the Gulf, according to U.S. government estimates, is the biggest in U.S. history.

By Jane Wardell

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Gulf Oil Spill